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Globus Medical Downgraded By Goldman, Sees 11% Downside

The outlook for smaller players in the Medical Devices segment was becoming difficult, Goldman Sachs’ David H. Roman said in a report. He downgraded the rating for Globus Medical Inc GMED from Neutral to Sell, while reducing the price target from $26 to $21.

A tougher competitive environment, due to efforts by large spine players to improve performance, may result in a decline in Globus Medical’s US market share from 60bp on average from 2013-2015 to 20bp from 2016-2019, analyst David Roman said.

Earnings Risk And Possible Rerating

Roman expects Globus Medical’s shares to come under pressure in the near future due to factors such as:

  • The company’s annual US market share capture is expected to shrink in 2016 and the outer years.
  • Globus Medical’s entry into trauma and robotics will take time to have a positive overall impact, with only modest sales contribution expected in 2017.
  • The company’s margins are at peak levels and may contract, given the lower topline growth and business reinvestment. Globus Medical’s EBITDA margins are expected to contract from 36.2 percent in 2015 to 33.8 percent by 2017.
  • The Street expectations appear too optimistic; and disappointing results may trigger a rerating of the company’s share price.

The revised price target reflects an 11 percent downside to Globus Medical’s shares, the analyst added.

DateFirmActionFromTo
May 2016Goldman SachsDowngradesNeutralSell
Jan 2016Bank of AmericaDowngradesBuyUnderperform
Oct 2015Leerink SwannMaintainsOutperform

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